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NPCI grants third-party app license to Paytm to perform UPI transactions

Following the NPCI's announcement, shares of Paytm rose at the opening of Friday’s stock market trading session and closed 5% higher at Rs 370.90 on BSE.


National Payments Corporation of India on Thursday granted One97 Communications Limited, parent of Indian fintech major Paytm, the license to participates as a Third-Party Application Provider (TPAP) to perform UPI transactions. The license comes just a day before troubled Paytm Payments Bank (PPB) is slated by the Reserve Bank of India to cease operations due to regulatory non-compliance.

“National Payments Corporation of India (NPCI) has today granted approval to One97 Communications Limited (OCL) to participate in UPI as a Third-Party Application Provider (TPAP) under multi-bank model,” NPCI said in a blog on March 14. “This will enable existing users and merchants to continue to do UPI transactions and AutoPay mandates in a seamless and uninterrupted manner,” it added.

Axis Bank, HDFC Bank, State Bank of India, and YES Bank will act as payment system provider (PSP) banks to the fintech company. Additionally, YES Bank will also act as a merchant acquiring bank for existing and new UPI merchants for the Noida-headquartered company and “@Paytm” handle will further be redirected to YES Bank. The country’s payments authority has also advised Paytm to complete migration for all existing handles and mandates, wherever required, to new PSP banks soon.

Following the announcement, shares of the company rose at the opening of Friday’s stock market trading session and closed 5% higher at Rs 370.90 on BSE. Still, the shares have reportedly dipped to over half in value since late January after RBI intensified its scrutiny on PPB.

To recap, the RBI imposed restrictions on PPB in January, citing “persistent non-compliances and continued material supervisory concerns”. Reportedly, these include inadequate customer identification and a lack of independence from Paytm. These restrictions included a ban on accepting new deposits and conducting credit transactions, starting from February 29th, which was later extended to March 15th.

Back to Paytm acquiring the TPAP license, it is important for the company as it is the third-largest UPI (Unified Payments Interface) app in India, just after PhonePe and Google Pay. According to a Reuters report, citing data on the NPCI, Paytm processed 1.41 billion monthly transactions worth 1.65 trillion rupees in February. The fintech platform reported 1.57 billion transactions worth 1.93 trillion in January.

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